AUB Group says premium rate rises are the “cream on top” as acquisitions and improved performance from existing operations drive stronger earnings.

CEO Mike Emmett says the company continues to invest in acquisitions and equity step-ups to supplement organic growth and the company put in place a strategic program several years ago to drive consistent profit growth regardless of market pricing.

“We did not subscribe to the view that we are a cyclical business dependent on the premium rate cycle,” AUB Group CEO Mike Emmett told an earnings briefing last week.

“We have a number of levers within our control that enable us to deliver sustainable long-term strong profit growth. We regard premium rate rises as cream on top, not something fundamental to our business.”

AUB underlying profit rose to $46.7 million in the December half from $30.6 million a year earlier, supported by its existing broking and agency operations and the first earnings from the acquisition of UK wholesale broker Tysers.

The company upgraded its full-year outlook ahead of releasing the finalised results, and last week also upgraded medium-term margin targets for its divisions.

Australian Broking underlying pre-tax profit rose 30.3% to $49.9 million as revenue increased and margins expanded as growth in existing operations was supplemented by bolt-on acquisitions and equity step-ups.

Agencies profit increased 38% to $12.3 million with organic growth partially offset by non-recurrence of some profit commissions.

AUB reported a turnaround in New Zealand, as changes were made and a new platform went live at a brokerage as part of a planned technology upgrade project. Profit for the half rose to $4.8 million from $3.5 million.

Earnings at BizCover, which targets smaller businesses, rose to $5.7 million from $4.9 million, while revenue growth slowed especially in Australian intermediated channels as comparator sites recently focused more on areas outside general insurance, such as mortgages and energy.

Mr Emmett says AUB is “more confident than ever” about the strength of Tysers, and its performance had exceeded expectations in the first quarter of ownership.

AUB now expects to deliver group underlying net profit after tax, including Tysers, in a range of $112.9-121.4 million for the financial year, up from the previous $107.5-115 million guidance.

Morningstar analyst Nathan Zaia says AUB management backed up a strong result with “bullish medium-term outlook targets” and the outlook is positive.

“The big profit growth numbers are largely driven by acquisitions but strong insurance rate rises and operating leverage within the business contributed to a still-solid 9% organic profit growth,” Mr Zaia says in a research report.

Seen ANALYSIS.